Captive power generation a long term alternate for sustained industrial growth, says Rajiv Agrawal of ICPPA

In your opinion what are the main challenges for power sector in India?

Rajiv Agrawal: In my opinion, all challenges merges in the balancing acts required in rationing of power for above mentioned 4 broad power usages. The CPP in industries are scattered through out country and have not been able to do intense lobbying as was recently done by private IPP (Independent Power Producers).

The infrastructure and its definition for power supply to unconnected villages is fraught with many pitfalls. The use of power consumption in cities & towns is not collectively addressed in the absence of political willpower and fear of backlash except resorting to power cuts. The wasteful power consumption is related to theft due to both infrastructure & collusion of executives; free electricity leading to wastage; increasing use of electrical gadgets in cities & towns; many more such items in the 4th category.

There is a need to change the prohibitive policy towards captive generation so that more industries set up captive generation. What is your take on this?

Rajiv Agrawal: To my view there are no prohibitive policies towards CPP. In the beginning when I mentioned that while implementing, the laid down policies have been set aside it specifically refers to policy framework available for CPP. It is the non-implementation of policies due to populist politics & influence of lobbying; the coal is un-available for CPP. This is the precise reason that even the constitutional interpretation about equitable distribution of coal has not been followed.

More than 1 MW generation by any entity for captive use is defined as CPP. Based on fuel, CPP may be broadly categorized as Coal based, Diesel powered, Non-conventional & reusable. Diesel power is a very costly option but its generator size and ease in fuel handling makes it popular. Approximately 55 per cent installed capacity is coal based CPP but DG sets are widely used as stand-by thus giving coal-based-power as largest share in generation.

Today industries across all sectors are suffering because after investing a few lakh crore rupees in CPP, availability of coal is turning it is as bad or under-used investment.

How are policy imperfections impeding growth of India’s coal mining sector?

Rajiv Agrawal: Post nationalization, the coal mining sector has been grossly underdeveloped. The experience & expertise outside CIL is available only with a few. Now giving coal mining rights to few entities either by selection or by competitive biding does not create equitable distribution of coal as national resource.

If we compare it with spectrum allocation, tele-company are harnessing (mining) the spectrum and equitably distributing this national resource to all tele-users. On the contrary even with captive-use clause, mine owner uses it for own purpose and other users still remain without Indian coal.

Further, allocation of coal blocks to future end use plants has deprived the existing users to get sufficient coal. It has also prompted many to corner the blocks for speculation. Similar situation is created when all present & future coal availability was allocated to IPP depriving the rest of nation & CPPs to get equitable share of coal. Now government is moving towards declaring that in current five year plan they may not give coal to 500 odd pending applications of CPP. A large number of these are already commissioned or are at advance stage.

In place of mines give-away, a BOLT model would have made coal available to all. Other option could have been a 51% private JV with CIL and proportionate distribution of mined coal would have made that 49% coal available to others thus creating equitable distribution of national resource. This would have improved efficiency due to private requirement and would have used CIL’s Rs. 55,000 Crore unproductive reserves lying idle. This is important because individual CPP & a large number of consumers don’t use coal quantity to justify for a coal block. It means, whatever happens under present arrangements, CPP will continue to suffer.

As a national policy, all countries try to minimize cost of energy & power. Whereas CIL is propagating that coal cost should be comparable with landed cost of imported coal. We are not against e-auction as one more method of “equitable distribution of coal”. Contrary to basic definition of “market” in elementary economics text-book, e-Auction under Monopoly is being considered as “free market by CIL”. In Feb’2011 CIL started charging 35-40% higher coal cost from CPP as compared to other power producers (and also from industry for non-power use). CIL declared that all industries operating in free market can sell their product at increased price to offset higher CIL price? I am leaving a few open questions on these impeding imperfections:

- Is it effect of few CIL managers going overboard to improve their internal ranking? or

- Whether CIL as PSU has forgotten that it also has mandate to work as “extended arm of welfare state (India)”? or

- Is it effect similar to setting aside policies under influence of FII with stake in CIL? (Refer legal actions initiated by TCI-UK against Ministry’s intervention in Jan’12 forcing CIL price roll-back after abnormal 80% to 270% price-raise in the name of GCV-based pricing)

Investments in captive co-generation power projects is the best option to meet the power supply deficit. Please share your views.

Rajiv Agrawal: As explained above, under continued long term power shortage scenario, CPP is the only long term alternate for sustained industrial growth. Moreover, most CPP produce electricity at the point of consumption thus saving 20% T&D losses (excluding 10% theft). This make CPP as the most efficient “Coal to Electricy-Consumption System” surpassing most modern super critical technology UMPP bringing in 3-7% thermal efficiency.

The industrial consumption is approx. 30% of national generation that requires high quality of uninterrupted power. To bring the whole grid at this quality level will imply improving quality of balance 70% electricity distribution. We know that at present India can not afford prohibitive cost of infrastructure up-gradation. Therefore decentralized generation through dedicated or group CPP is the only sustainable option.

Industry has already invested and is in the process of investing few Lac Crore rupees in CPP. Government only has to ensure coal availability for CPP.

It has been generally seen that SMEs fail to meet their export commitments due to power shortage during peak season. In your opinion, how they can overcome this problem.

Rajiv Agrawal: Electricity Act 2003 & rules have already provided for Group CPP that can be set-up under JV of SMEs in geographic vicinity with mandatory 51% consumption by its constituents and remaining electricity can be sold if not used. This can provide peak electricity to SME for meeting peak demand and option to reduce generation or sell excess power to grid. As explained earlier, the only constraint is that government has to ensure coal availability for CPP.

While creating current Electricity policy,the government also contemplated that idle or under utilized CPP capacity including stand-by DG sets can be harnessed to fill peak hour demand gap. However, a little has been achieved due to various reasons including delayed payments from State Discoms, higher resource needed for recovery, higher cost due to non availability of linkage-coal, higher cost DG-power. The opportunity for nation still exists.

Is the decision-making process an impediment?

Rajiv Agrawal: It is a mixed bag of decision making, concentration of resources in the hand of few financially strong entities, today's brand of divisive politics, leaking financial flow, populism over rational & long term decision making are all to be blamed.

What are the key priorities of Indian Captive Power Producer Association (ICPPA)?

Rajiv Agrawal: Coal linkage should be made availabile for all CPP as & when it become operational, ending discrimination against CPP, including higher price charged by CIL from Feb' 2011, resolve problems faced by CPP with CIL & subsidiaries, take-up matters related to differential power taxation and rules at state level and help government in creating CPP friendly policies.

What measures, according to you, should Central government adopt in order to promote captive power generation in the country?

Rajiv Agrawal: As explained earlier, since the policy frame work already exists for CPP, the government should properly implementation policies and also remove the hurdles in getting coal.

At the same time, Central government should implement uniform power taxation & power administration policies across states to remove discriminations created by states.

Please share your roadmap for the current fiscal (2012-13).

Rajiv Agrawal: In the current coal turmoil we are focusing on achieving our key priorities. CPP are scattered throughout country and no single agency has exhaustive information about CPP. Therefore enrolling more and more CPP for ICPPA membership is also a herculean task in our hand. We are reachable at icppassociation@gmail.com. You can also visit our website and enrollment at a very nominal fee http://icppa.webs.com